Google rewrites corporate structure with Alphabet

Originally published August 10, 2015 at 7:10 pm
Updated August 10, 2015 at 7:22 pm

Google’s headquarters in Mountain View, Calif. The technology giant is changing its operating structure and will become part of a holding company called Alphabet. (Marcio Jose Sanchez/AP)

Google will reorganize under a corporate umbrella it’s calling Alphabet to give investors a clearer picture of the many new ventures it has bankrolled, from self-driving cars to high-speed fiber networks.

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SAN FRANCISCO — Google, which has been expanding far beyond its original business of Internet search advertising, is changing its operating structure by creating a new holding company called Alphabet.

The company says its new structure will give more independence to many of its wide-ranging and ambitious projects.

Under the plan announced Monday, Alphabet will be composed of the core Google business — including Internet search, mapping and YouTube — along with newer businesses that will be managed separately, such as Google Fiber, the smart-thermostat company Nest and the investment arm Google Ventures.

What will be separated under Alphabet

• Google

• Calico, an anti-aging biotech company

• Life Sciences, a company focused on health efforts

• Nest, a maker of Internet-connected devices for the home

• Fiber, high-speed Internet service in a number of American cities

• Investment arms, such as Google Ventures and Google Capital

• Incubator projects, such as Google X, which is developing self-driving cars and delivery drones

What will remain part of Google

• Search

• Advertising

• Maps

• YouTube, the video service

• Android, the company’s mobile operating system

The New York Times

Google CEO Larry Page will become CEO of the new entity, with his co-founder Sergey Brin serving as president.

Longtime Google executive Sundar Pichai, who has taken on increasingly important roles at the company in recent years, will be CEO of the core Google business.

The change may give investors a clearer picture of how much Google is spending on some of its newer ventures, like its effort to build a self-driving car, develop a glucose-sensing contact lens or install high-speed Internet fiber networks in a number of U.S. cities, said Colin Gillis, an investment analyst at BGC Partners.

“There’s been a lot of speculation about how much money they put into these other ventures,” he said. “That will come to an end. This also gives them the structure to add in another business line if they were to acquire something. The mechanism is in place.”

The goal isn’t to make Alphabet a consumer brand, Page said. Google is adopting this structure in order to make clearer the difference between its main business and longer-term endeavors.

Investors will get more details on how the businesses are operating, a longstanding request from Wall Street. Under the change, the core Google company will report separately from the investment and research arms, according to a filing. Alphabet will report its results under this new structure commencing with the fourth-quarter earnings release, typically posted in January.

“We’ve long believed that over time companies tend to get comfortable doing the same thing, just making incremental changes,” Page wrote in the post. “Our company is operating well today, but we think we can make it cleaner and more accountable.”

Once the reorganization is complete, the company says, its two existing classes of publicly traded stock will continue to trade on the Nasdaq exchange under the ticker symbols “GOOG” and “GOOGL.”

Both classes of the Mountain View, Calif., company’s stock rose more than 6 percent in after-hours trading following the announcement Monday afternoon.